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The 2013 budget gospel according to Okonjo-Iweala

March 11, 2013 : Eze Onyekpere (censoj@gmail.com)

Eze Onyekpere | credits: File copy

On Thursday, March 7, 2013, the Minister of Finance and the Coordinating Minister for the Economy, Mrs. Ngozi Okonjo-Iweala, presented the 2013 budget briefing through a document titled, “Overview of the 2013 Budget”. Considering that government is the largest single articulated spender in the economy, it is the imperative for this discourse to analyse that document, highlight its salient points and their implications for Nigeria’s economy and social progress in 2013. This analysis is anchored on the fact we cannot build a sound fiscal system by refusing to learn from experience and planning for developmental expenditure within full knowledge of the binding constraints that have held back full capital budget implementation and value for money.

In the opening protocols, Okonjo-Iweala thanked her colleagues in the executive for their contributions to the budget and also acknowledged the effort of the leadership of the National Assembly, all relevant committees and the Budget Office for completing the 2013 Budget in “record time”. The direct issue arising from this opening is that the minister started the presentation by deliberately misleading herself. A budget that had yet to be ready in the first half of March was stated to have been completed in record time when the law expected it to be ready on January 1, 2013. For the avoidance of doubt, the budget had yet to be ready and the details were not available anywhere including the website of the Budget Office of the Federation as of the night of Saturday, March 9, when this discourse was prepared. All that is available to the public are the sectoral broad figures. Essentially, the 2013 budget is not ready and if it is ready, there is no reason for it not being available to the public.

In the overview of the world economy, Okonjo-Iweala presented growth figures of the United States which is forecast to average only two per cent in 2013. Similarly, the near-term outlook for the Eurozone has been revised downwards, with growth expected to contract by 0.2 per cent. In Asia, the short-term outlook for Japan is weak, with the Japanese economy expected to expand by only 1.2 per cent in 2013. Overall, global growth will average 3.5 per cent in 2013, a moderate increase from 3.2 per cent in 2012. Missing in this analysis are the projections for India and China and other front-runners. It is imperative to understand that the two per cent growth forecast of the US is against the background of an economy with unemployment rate in the single digit of about seven per cent.

On developments in the domestic economy, the minister painted a picture of a strong and resilient economy which has been validated by external experts. This is a great lie. The growth figure of 6.5 per cent is on paper and has no link with the living conditions of the majority of Nigerians whose poverty is on the increase. Not less than 70 per cent of Nigerians live below the poverty line, yet, the economy is said to be growing. There is nothing to celebrate in an inflation rate which is far higher than the deposit rate paid to bank depositors for placing their money in a bank. While bank customers get an average of three to four per cent, Okonjo-Iweala is celebrating nine per cent inflation rate. Thus, the economy is discouraging people from saving money in the banks by penalising them through loss of value as a consequence of patronising the banking system.

“The leading international rating agencies – Fitch, Standard & Poor’s, and Moody’s – have upgraded the outlook for the Nigerian economy, even at a time when other developed and emerging economies are being downgraded”, Okonjo-Iweala gleefully sang. Are these not the same rating agencies that were scoring the world leading economies with high marks until the financial crisis of 2008? How does this upgrade translate into improved living conditions for the populace? Put differently, how does it reduce the cost of living or improve the ability of a fresh graduate to secure employment easily? The days of the economics of sterile graphs, charts and rating agencies that are not linked to improvements in the human condition are over and should be given a decent interment. No one is interested in stories and stories have never worked and will not work in the present day. How can an economy that has over $47bn in debt but is dependent on crude oil sales as the major foreign exchange earner claim resilience?

The performance of the 2012 budget gives an idea about the possible results in 2013 considering that nothing has changed in the system and the facts relating to the time of commencement of execution for 2013 is taking concrete steps to replicate 2012. Contrary to the rhetoric that the cost of governance is coming down, only N686bn representing 14.6 per cent of appropriated funds was spent on capital expenditure in 2012 leaving the balance of 85.4 per cent for recurrent expenditure! If we disaggregate this capital expenditure further taking into consideration corruption and inefficiencies, it will come down to not more than 10 per cent of appropriated funds. Domestic borrowing in 2012 was N744bn which meant that we expended all our revenues duly earned from oil and non oil receipts in recurrent expenditure and used about 92.2 per cent of internally borrowed funds on capital expenditure. Indeed, some part of the internally borrowed funds went for recurrent expenditure contrary to the stipulations of the Fiscal Responsibility Act.

For the 2013 budget, statutory transfers of N388b is 7.78 per cent; debt service of N591.76bn is 11.87 per cent; recurrent expenditure of 2.38tr is 47.72 per cent with overhead’s N208.9b contributing 4.19 per cent and personnel’s N1.717tr taking up 36.56 per cent. The capital vote of N1.894tr is 37.98 per cent disaggregated into N1.62tr being 32.5 per cent for normal capital expenditure and N273.5bn being 5.48 per cent for SURE-P. It is imperative to note that personnel expenditure is more than capital expenditure without the SURE-P.

Given the above scenario, it is clear that unless something drastic is done by government, capital budget implementation in 2013 will remain at the 2012 level and the nation’s infrastructure deficit will continue to widen. There is the need, therefore, to put in place checks and balances to ensure that Ministries, Departments and Agencies actually provide services, goods, works and construction for which they are handsomely paid. One would expect that the President’s performance contract with ministers would lead to the weeding out of non performing ministers who from the above budget performance figures are in the majority in his cabinet. It is important to remind the President that this poor budgetary performance will turn out to be a major hurdle in his quest for a possible re-election. Nigerians will demand to know what he did with resources entrusted to him in five years before considering him for another term. As it stands today, the score is below average and we cannot reward shoddy performance as one “good term” efficiently utilised deserves another.

Finally, Nigerians need to wake out from their deep slumber and bring together our strengths to kick out high level officials who refuse to use our money for the benefit of all but are content with earning the perks of office without contributing to our security and welfare.

the need the ratings to borrow more money. its all financialism. while other countries boast of how many school children have been enrolled, how many kilometers of roads and brigdes built, teachers trained, reserch labs funded…my country is talking of tranforming by borrowing more.

http://twitter.com/ChukDan dan chuk

I found some aspect of the presentation by Dr. Iweala cheering. We were told that the recurrent expenditure has reduced to 68%. Though, we are not there yet, that calls for celebration. I believe she is making an appreciable impact on the Nigerian economy.

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